PRES. BARACK OBAMA: A free market is never meant to be a free license to take whatever you can get however you can get it.

(End videotape)

MR. GREGORY: ...Washington vs. Wall Street. Is a deal near on financial reform or is it the healthcare debate all over again? What will pass and what will it really mean to how the financial system works in America? We'll ask the two men trying to shape an agreement, the chairman and ranking member of the Senate Banking Committee, Democratic Senator Chris Dodd of Connecticut and Republican Senator Richard Shelby of Alabama.

Then, the growing political divide, Arizona's Republican governor signs the nation's toughest immigration law, but President Obama calls it misguided.

Plus, populist anger against Wall Street as the CEO of Goldman Sachs prepares to face questions on Capitol Hill this week and at the same time deepening distrust of government's role in the economy. How will voters sort it out in November? Our roundtable weighs in: The New York Times' David Brooks, CNBC's Erin Burnett, NPR's Michele Norris, and Newsweek's Evan Thomas.

MR. DAVID GREGORY: But first, an exclusive interview with the two men at the center of the debate over financial reform, the chairman and ranking member of the Senate Banking Committee, Senator Chris Dodd and Senator Richard Shelby.

MR. GREGORY: Good to have you here. This is high noon for financial reform.

So, Senator Dodd, the big question is do you have a deal?

SEN. DODD: Well, Richard and I spent a lot of time together over the last year and--working on this bill, and we're getting there. We're close; we've got some more work to do. We're going to be meeting, I think, later today, in fact, to talk about it. We're not there yet, but I would hope that, that we could the votes tomorrow on--when we have this motion to proceed to the bill to start the debate. And, again, I think Richard and I have a pretty good understanding of where we are on these matters. We can't take care of everything in the bill. Obviously, our colleagues are going to want to be heard. But we've been through an awful lot now. We've lost almost $11 trillion of household wealth in the last 17 or 18 months, seven million homes in foreclosure, eight and a half million jobs have been lost, retirement incomes have declined by 20 percent, housing values declined by 30 percent, this morning's news obviously about Goldman Sachs. Here we are 17 months after someone broke into our house, in effect, and robbed us, and we still haven't even changed the locks on the doors, and we need to get it done.

MR. GREGORY: Well, Senator Shelby, I mentioned this is high noon, you've got Democrats saying, "This is it. You're either with us or against us." OK? You've got Senator Reid on--talking on Capitol Hill on Thursday saying this:

(Videotape)

SEN. HARRY REID (D-NV): We have--we worked for more than, more than two months with Shelby trying to come up with something. We worked for over a month trying to come up with something with Corker. Now, this is very simple, if they're willing to go forward with reform, that's, that's what we'll do; but I'm not going to waste anymore time of the American people until they come up with some agreement.

(End videotape)

MR. GREGORY: So is there something Republicans can vote for here?

SEN. SHELBY: Not yet, but we're getting there. Like Senator Dodd said, we--we're working closely together. I think we're conceptually very, very close. This is a very complicated piece of legislation, over 1,300 pages as the Dodd bill now stands. But we're--what we're trying to do is improve two or three things in it. It's, it's very, very tedious. We're going to continue to work today, as Senator Dodd said. I think we're closer than we've ever been. And will we get a bill by tomorrow? I, I doubt it. I would always hope so because there's so, so much involved. But I think we will get a bill. If the Democrats want a bill and will give us some things that we think that are substantive in nature, like make the "too big to fail," send a message that nothing is too big to fail in this country and tighten up the language. There's some
flexibility in the language there that we're talking about is--and...

MR. GREGORY: ...that, that are sticking points, but I just want to nail down this point. A vote goes down tomorrow to begin the debate. Will Republicans try to block that or will they vote to let that go forward?

SEN. SHELBY: Oh, I think that tomorrow that nothing happens between now and tomorrow, that the Democrats will not get cloture, but we'll continue to work. That's the first vote, we'll--don't know when there'll be another vote and so forth, but if Senator Dodd and I and our staff
continue to work, we can get a bill.

MR. GREGORY: But you, you heard what Senator Reid said. Are the politics just too difficult for Republicans to stand in the way and to oppose reform?

SEN. SHELBY: Oh, no. Not, not the Dodd bill. I think the Republicans sent a letter out as--what came out of the banking committee that 41 said they were going to oppose the legislation as it now stands. Now, that doesn't mean that they're not encouraging me as the ranking Republican to continue to negotiate, because most people believe we can get a bill.

MR. GREGORY: OK. I want to talk--before we get to some of the issues like "too big to fail," bailouts--you may be getting a call of somebody who can make a deal here, we don't want to stand in the way of that, Senator. But on the front page of The Washington Post today, more news about Goldman Sachs. They have denied wrongdoing, they're facing civil fraud charges. But the headline had to do with some internal documents that were leaked from a Senate committee about internal discussions about the housing market. We'll put it up on the screen. This is how The Washington Post reports it this morning: "As the U.S. housing market began its epic fall nearly three years ago, top executives at ... Goldman Sachs cheered the large financial gains the firm stood to make on certain bets it had placed, according to newly released documents. The documents show that the firm's executives were celebrating earlier investments calculated to benefit if housing prices fell, a Senate investigative committee found. ...

"Lawmakers said the internal e-mails, released Saturday by the Senate Permanent Subcommittee on Investigations, contradict what they said are Goldman's assertions that the bank was not trying to profit from the decline of the house market in 2007 and was merely seeking to protect itself if prices collapsed." Isn't this what really fuels the anger at Wall Street? That, in effect, you appear to have elements within a company betting against the market, betting against the economy to make money in a way that does not seem to create jobs or create commerce?

SEN. DODD: Frank Rich in The New York Times this morning, and I may not quote him exactly, but I think he has it exactly right, and this is there's something terribly wrong about a system in a country of ours where you make billions of dollars by making nothing or producing nothing, but merely taking advantage of an economic situation. Now, again, these investigations going on and the legal matters involve Goldman Sachs, and I suspect others will come as well, just heighten the point. And again, I--Richard and I are working closely together. This doesn't end the debate tomorrow; it begins the debate. And Richard and I both know, as Richard's a former chairman of the committee as well, you don't get resolution of matters ultimately until you're at the table and have to do so. So I, I hope tomorrow we can get those votes. We may not, but I hope we do because we need to move forward. We only got about 40 or 50 legislative days left, David, in this session of Congress. Can you imagine if we left town, tomorrow if another crisis occurred in the country, we're no better off than we were in the fall of 2008. We have no cops on the beat, major sectors of our, of our economy are unregulated entirely. We have all of this going on out there, could happen again, "too big to fail" could happen again if we don't change the law. Richard and I agree on this point.

SEN. SHELBY: First of all, from my perspective and, and the perspective of a lot of people in America, we've got to end once and for all the casino atmosphere of Wall Street where they're gambling, basically, on synthetic ideas and so forth.

MR. GREGORY: How--a lot of people in the public, though, they hear that kind of rhetoric and then they also look at the record of contributions from a firm like Goldman Sachs and the securities industry and investment industry. Let's put up on the screen for the two of you and for President Obama as well what some of the contributions were from employees and family members. For the president, you see over a million dollars just from Goldman, over--nearly 16 million in securities and investment industry. And for both of you as well, significant amounts,
certainly, from the industry as a whole.

Senator Dodd, how is that relevant? How do you separate all of that out when you've got firms that have significant--making significant contributions to you?

SEN. DODD: Well, again, look, as someone who's a strong supporter of public financing of federal elections, I think the system is deeply troubled. But I also happen to believe that most members of Congress that I know don't sell their votes for contributions. Now, what we do
see going on, putting aside the contributions, a story this morning, literally millions and millions are being spent on lobbyists, particularly in the last few weeks realizing this bill may actually get done, to try and stop the legislation from happening, want to kill this bill if they can, they like the status quo. Richard and I share the goal of getting a bill done here. We both understand the value and importance of it. We just would like to get the debate going. If we don't get the debate going...

MR. GREGORY: All right. But, but, but, but there--people I talk to on Wall Street say that kind of rhetoric is totally over the top, that they want stringent regulation but that there are details that are very important that, frankly, a lot of senators and congressmen and women
don't understand because of their complexity and yet they're willing to just, because of this political atmosphere, pass sweeping regulation that could hurt competitiveness, that could send jobs overseas and all the, all the rest.

SEN. DODD: David, I was born at night but not last night. With all due respect to those arguments, those are red herrings. We understand the complexity of it, that's why we spent so long at this. Richard and I have spent the last two years basically, 39 months, going through hearings, working at this, listening to people, countless conversations with experts in the field. And there are some disagreements here. Not on "too big to fail." We're going to shut that down forever. We want consumers to get some protection. We'd like an early warning system so we don't end up getting into trouble in the first place. And then making sure that no financial institution's going to be unregulated in our country. We won't...(unintelligible).

MR. GREGORY: All right, Senator Shelby, let, let's talk about the issue of bailouts because this is really important. You've heard Senator Dodd say this will guarantee no more taxpayer-funded bailouts. The president, speaking on Wall Street on Thursday, made his case. This is what he
said:

PRES. BARACK OBAMA: What's not legitimate is to suggest that somehow the legislation being proposed is going to encourage future taxpayer bailouts, as some have claimed. That makes for a good sound bite, but it's not factually accurate. It is not true.

(End videotape)

MR. GREGORY: OK. So what's the substance behind that argument? Secretary Timothy Geithner was on the program last week and I asked him specifically that question, how they could make that kind of guarantee, and he said what the bills would actually do substantively.

(Videotape, April 18, 2010)

SEC'Y TIMOTHY GEITHNER: They will make sure if a large institution ever again managed itself to the point where it can't survive on its own and it has to come for the government for support, then the government will put its in--put it into receivership, it will wipe out shareholders, it will replace management and board, and will make sure that we wind that firm down. We dismember it. We sell it off so it cannot exist again to make those kind of mistakes in the future.

(End videotape)

MR. GREGORY: Senator Shelby?

SEN. SHELBY: That, that, that would be our goal, too...

MR. GREGORY: Right.

SEN. SHELBY: ...to make sure that any failed institution is wound up. But this--the language in the Dodd bill doesn't say that. It's not there yet. It's--we're tightening it up. I believe that he will work with us. But...

MR. GREGORY: But let's get past some of the legislative speak. What, what is it that is, is not there, you think, that still has taxpayers on the hook?

SEN. SHELBY: Too, too much flexibility with the Fed and also with the FDIC. It's in...

MR. GREGORY: In other words, the FDIC can get access to a lot more money.

SEN. SHELBY: Absolutely. Absolutely.

MR. GREGORY: The Fed can issue loans.

SEN. SHELBY: Absolutely. And we need...

MR. GREGORY: So the taxpayers still could be on the hook.

SEN. SHELBY: We need to tighten that up to make sure that it doesn't happen. The message should be, unambiguously, that nothing's too big to fail. And if you fail, we're going to put you, put you to sleep.

MR. GREGORY: So, Senator Dodd, let me try to break that down a little bit. If the notion is that the government sees a firm taking excessive risks, they're looking through the window a little bit at how the business is being run, they may make comment, regulators saying, "That's
excessive risk, you shouldn't do that. That's systemic risk. We're going to--you know, we're going to move in. You have--brink of insolvency here. You, you prefunded a fund that can pay for that, that banks would pay for, but there's still a lot of access to government cash that taxpayers pay for if they get in trouble and if they need more cash.

SEN. DODD: Well, no. First of all, even beginning before that, the systemic risk council just doesn't give advisory rules, they instruct the Fed with institutions that are engaging in excessive risk. They can go so far as to break them up. Now, that's a--an action of last resort.

SEN. DODD: But that power exists in our bill. Now, regarding access to, to, to resources out of the Fed under that, that 13(3) provisions here, that is so tight here, in fact, we're down to the point of insisting that Congress be involved in determining whether not it can go forward. We've never done that before. So it, it's very, very tight, in our view. And whether or not you have approval or disapproval, that's really the argument. So this is very, very tight.

MR. GREGORY: But here's--but isn't the bigger question about the role of government here? I mean, we had a lot of regulators on the job who missed what was going on. We had warnings to the likes of the head of the Fed, Alan Greenspan, about the bubble in the housing market and impending collapse. You have bureaucrats who work in the government, who, who warn about really big things that could happen. There wasn't the political will or people didn't have the judgment to intervene the last time. How is that different now?

SEN. DODD: Well, because a couple of things. First of all, we don't have unregulated--a lot of the problems occurred in the unregulated part of our economy. Richard Shelby and I are not going to allow that to happen again. There's every financial--major financial service is going
to be potentially--or regulated under this bill. Secondly, you're going to put resources to work here, put cops on the beat watching all of this, stopping too big to fail. Consumer protection is a major part of this bill. In the past we didn't watch out for consumers. Safety and
soundness is critically important, but what happens with credit cards and mortgages, people lured into arrangements they knew they could never afford...

MR. GREGORY: But there...

SEN. DODD: ...people who would allow that to happen?

MR. GREGORY: ...there's still the same question: Is the government up to this job of regulation when it hasn't proven to be...

SEN. SHELBY: That, that's an excellent question. They haven't been. The regulators failed us. The Fed, all the regulators failed the American people. The question is, will they--what have they learned? We hope they've learned a lot. We should never go back to 18 months ago when we're--everything was at risk. Now, what we're trying to do is tighten this language to make sure there's just not so much flexibility for the regulators to go back again.

MR. GREGORY: Well, let me challenge, then, you on a point then.

SEN. SHELBY: OK.

MR. GREGORY: If the, if the, if the, if the complaint is government's not up to it, we had regulators before, can they do it this time, and we're so worried about bailouts, look at the track record of bailouts so far. The president was boasting yesterday that GM and Chrysler have paid off their debts, not completely, but, but, but way ahead of schedule. TARP is now $186 billion back. The overall payment is supposed to be around $87 billion. The record's been pretty good that the government's and the taxpayer have done OK so far in bailouts, have they not?

SEN. SHELBY: First of all, the payback by General Motors and Chrysler will never happen, not all of it. That's misleading, even what the president said there. And they paid back some money that they were already given by the TARP money. They haven't paid back the other, and they won't. Some of the banks have paid back the money, and that's good. But we should never go down that road again. If the regulators do their job and if we tighten this legislation, we won't have to visit it again.

SEN. DODD: Let me--I'm going to go back to your previous question for a second, David, because I think it's important. What we're trying to do is put--make sure what happened can never happen again, provide the tools--there'll be another economic crisis, it's silly for us to argue otherwise. The question was, will we have the tools to respond to it before it gets so out of hand it puts our entire economic system at risk, with the job losses and all the other items I mentioned? But thirdly, our goal here is we don't want to so strangle a system that we can't create jobs, have credit flow and capital form to benefit--and to lead the world. What happened in Greece ought to remind us, it's not just locally--domestically located where problems can occur. There was a failure in the Shanghai Exchange a few years ago that represented less than 5 percent of the volume of the New York Stock Exchange. It declined
by 12 points. Around the world, within about 24 hours, markets reacted to this. We're in a global economy. The United States needs to lead on financial services. That's also part of our goal in this bill.

MR. GREGORY: But, but isn't this still the central question, that you're trying to manage the downside instead of trying to prevent it beforehand? In other words, who, who is it in the government who's going to call the head of a major multinational bank and say, "We've been watching. You're taking too much risk, and this is potentially systemic risk. We"--who, who is going to do that?

SEN. DODD: Well, what Richard, Richard and I do in this bill, I think we agree on this point, the systemic risk council is made up of the prudential regulators, chaired by the secretary of the Treasury with, with a vice chair by--out of Federal Reserve, with a team of also collecting data in real time. This is something that Bob Corker and Mark Warner insisted in our bill. It's a very good provision. Real-time data so we know on a daily basis what's happening, rather than waiting for some good investigative reporter to point out something. So you watch these either by product line or by institution getting so large, so interconnected it puts us at risk. That's a great advantage this bill has that we don't have today.

MR. GREGORY: And yet, Senator Shelby, there are Democrats who are saying if you want to prevent "too big to fail," don't allow banks to get too big. Do some of the biggest banks responsible for so much money in, in the country, should they be broken up?

SEN. SHELBY: Well, that's a, a good question, and that's one that Dr. Volcker's talked about for years. And he says if you're too big to regulate, maybe you're too big to, to exist, in other words, because you will cause systemic risk. Being big, in my judgment, is not necessarily
bad. But it's bad, bad when the perception is that the big is going to be bailed out and the small are going to be gobbled up by the regulators.

MR. GREGORY: But you're--so you're not for that.

SEN. SHELBY: I'm not for it per se.

MR. GREGORY: You don't see a need for it.

SEN. SHELBY: But I do believe that any regulator ought to have the power, if they see a bank is getting so risky and into things and maybe so big, and if they don't have the capital and they don't have the management, to make them do things, whatever it is, is shrink or whatever.

MR. GREGORY: You think banks should be broken up?

SEN. DODD: Well, I, I--Richard and I sort of agree on this point. I--it's the regulation of these institutions and what they're doing, and whether or not they're able to conduct and engage in excessive risk at our expense. That's why the Volcker rule is important.

MR. GREGORY: Right, you guy--so the Volcker rule would say to the banks, "There's certain things you can't do," what they call proprietary trading, to...

SEN. DODD: Gambling with my money.

MR. GREGORY: Right.

SEN. DODD: With low interest rates. Having, having their banks or holding companies...

MR. GREGORY: What would it actually mean? Because a lot of people on Wall Street say you guys can't even define exactly what it would mean.

SEN. DODD: Well, they can't start--they can't be engaging in hedge funds and venture capital and these kind of risky, overly risky behaviors.

MR. GREGORY: Right. But, you know, I--in some of my research, I read in 2007 that you, you wanted to make sure that hedge funds could still prosper in the country.

SEN. DODD: I'm not opposed to hedge funds prospering. I want them registered. I want to know what they're doing so they're not putting us at risk.

MR. GREGORY: Mm-hmm.

SEN. DODD: This is the point, striking this balance. You're going to have David Brooks on in your panel in a few minutes. David's written about trying to strike this balance, and he's right. We do need to have good cops on the beat doing a good job so we don't allow this stuff to
get out of hand.

SEN. DODD: But simultaneously, not to stifle the innovation and creativity that have been the source of our great success as a country.

MR. GREGORY: Right. Final point on this, just quickly from both of you. What, in the end--so people are really clear on this--what, in the end, is going to pass?

SEN. DODD: The Dodd bill.

MR. GREGORY: So the top three points are?

SEN. DODD: The Dodd bill: "too big to fail," put an end to it; good consumer protection, early warning system, and shining the light on these exotic instruments. We didn't talk much about the derivatives, the, the over-the-counter...

MR. GREGORY: Our bets on a financial outcome in the future.

SEN. DODD: Yeah. Went from $91 billion to $591 billion in 10 years. It was, it was the Wild West. We've got to stop it. You got to...

MR. GREGORY: Do you...

SEN. DODD: That was...(unintelligible). Those are the four points.

MR. GREGORY: Do you fundamentally agree, those, those several points, that that's what will pass?

SEN. SHELBY: I don't believe the Dodd bill as now constituted will pass. Now, it might be the Dodd bill as we rework it, which we're, we're doing. Which we're doing...

MR. GREGORY: In the end, do you think you're a yes vote as you sit here today?

SEN. SHELBY: Only for a substantive good bill. Not for the bill that exists. I'd be a yes vote if it's a good bill.

MR. GREGORY: And you think you'll get there?

SEN. SHELBY: I think we'll get there.

MR. GREGORY: OK.

I want to add something, a couple, a couple, this immigration debate...

SEN. SHELBY: Yeah.

MR. GREGORY: ...is now really flaring anew because of this law in Arizona. The president said that the Justice Department will take a look at. And now, Senator Dodd, you see immigration reform by the Democrats is going to be on the front burner. What is the, the, the impact then of the Arizona law on the debate that we'll see take place?

SEN. DODD: Well, only this much, I think. And putting us--I mean, I think Arizona law is outrageous, the idea that we go around asking people for documentation and put you in jail if you don't have it. The idea that state by state would start developing its own immigration laws in the country, imagine what a patchwork that might look like. Last year 48 states passed 222 resolutions and like 140--220 laws and 140 resolutions on the issue of immigration. This is a--it's demanding a national answer to immigration policy. So before this even gets further out of hand, we've got to step up and do the job.

SEN. SHELBY: Well, I agree with that. States are frustrated. People are frustrated because they believe that the federal government, the immigration people, have not enforced the laws. We have 12, 15 million illegal immigrants in this country. You say why? So I think that begets
what's going on in Arizona.

SEN. SHELBY: Well, timing is now. I think the first thing we better do is enforce our, our borders and know who's here and who comes and who leaves. That's number one, and then go into the rest.

MR. GREGORY: Finally, Senator Dodd, the political outlook for your party in the fall. You're not running.

SEN. DODD: Yes.

MR. GREGORY: Is President Obama an asset or a liability, and what do you, what do you project for the Democrats in the fall?

SEN. DODD: Oh, I think he's an asset, without any question. I think the--getting the healthcare bill done, the arms control agreement with, with Russia. The country's getting--we're better off. We're obviously moving in the right direction economically. A lot has not happened yet on Main Street with high unemployment and the rest, but certainly the worst is behind us. He's showing real leadership. Richard and I are going to get this bill on financial reform with colleagues. That's going to be a major achievement for our country. I, I think having the president on your side is going to be a great asset.

Coming up next, an impending showdown on immigration after President Obama criticizes Arizona's restrictive new law. Plus, across America, anger at Wall Street and a distrust of Washington. How will voters react to it all in November? Our roundtable weighs in: The New York Times' David Brooks, CNBC's Erin Burnett, NPR's Michele Norris, and Newsweek's Evan Thomas, only here on MEET THE PRESS.

(Announcements)

MR. GREGORY: Up next, debating the populist anger against Wall Street and new battle lines being drawn over illegal immigration. Our political roundtable weighs in on it all after this brief commercial break.

(Announcements)

MR. DAVID GREGORY: We are back with our roundtable and the politics of the tough new illegal immigration measure in Arizona which makes illegal immigration a state crime and requires local police to check the status of people they believe are in the country illegally. Even before it was signed into law by the Republican governor of Arizona Friday evening, President Obama launched a pre-emptive attack against it as he called for federal immigration reform.

(Videotape, Friday Morning)

PRES. BARACK OBAMA: Our failure to act responsibly at the federal level will only open the door to irresponsibility by others. And that includes, for example, the recent efforts in Arizona which threaten to undermine basic notions of fairness that we cherish as Americans, as well
as the trust between police and their communities that is so crucial to keeping us safe.

(End videotape)

MR. GREGORY: For her part, the governor strongly defended the new law and her controversial decision.

GOV. JAN BREWER (R-AZ): Today, with my unwavering signature on this legislation, Arizona strengthens its security within our borders. Let me be clear, though, my signature today represents my steadfast support for enforcing the law, both against illegal immigration and against racial profiling.

(End videotape)

MR. GREGORY: All setting the stage for a national battle over immigration reform in this midterm election year. We are joined now by NPR's Michele Norris, David Brooks of The New York Times, CNBC's Erin Burnett, and Evan Thomas of Newsweek. Welcome to all of you. A lot to get to.

So, David Brooks, immigration is now a front burner issue.

MR. DAVID BROOKS: Right. First of all, I think this bill in Arizona is an invitation to abuse. You're going to have the government making decisions on the basis of race. And at what level are they making these decisions? At the cop level, in the worst possible circumstances, when
people are angry? It's an invitation to sort of racial profiling and abuse. So I think it's terrible. But the worst effect is happening back here because now we have the Democrats promising to have a comprehensive immigration bill before any of the preparatory work has been done,
pushing aside a lot of other stuff, like cap and trade and energy. And why are they doing it? For purely political reasons because a lot of Democrats, including Harry Reid who is trying to get re-elected in Nevada, need to really fire up Latino voters to get them to come out to
the polls.

MR. GREGORY: And to that point, Michele Norris, this was how The Hill reported the political pressure on Democrats, in the White House and in Congress. Here it was. "A congressman from the president's home state is threatening that he will urge Latino voters to stay home this November if the party does not make a concerted effort to pass comprehensive immigration reform."

Representative Gutierrez, "arguably one of President Obama's biggest Democratic critics in Congress. ... He's strongly criticized the administration's policy on deportation and questioned its commitment to far-reaching reform.

"Some Democrats have felt little urgency in pursuing the controversial issue," partially because--partially--"partly because they see no risk that Hispanic voters will bolt the party for the GOP. But Gutierrez says they're missing the real political consequence of inaction.

"`We can stay home,' Gutierrez said in an interview with The Hill. `We can say, "You know what? There is a third option: We can refuse to participate."'" That would hurt Democrats.

MS. MICHELE NORRIS: That would hurt Democrats and that would make people in, in, in the DNC crazy because they had made significant inroads in the--among Hispanic voters this year...

MS. NORRIS: ...in, in the presidential election. You know, I, I think when push comes to shove, I doubt that the representative will be making that kind of claim and pushing people to stay home. I mean, David is right, though, that this is going to create a real problem. And if you actually look at what's going on in Arizona and if you spent some time talking to the police chiefs in Arizona who are actually going to be, you know, forced to make these calls, they're really uncomfortable with this. I mean, there are some basic questions that haven't been answered. How do you define someone who is said to be suspected of being in this
country illegally? You know, does that just include someone who happens to speak--be speaking Spanish? Does that include the, the British student who overstayed their visa? Does that include the, the Irish pub worker who, you know, is, is here on a tourist visa? There's a lot of discomfort in this.

MR. GREGORY: But the, but the, but the argument, Evan, from the governor is, look, you're going to be in a situation where if somebody's being investigated for a crime, then you can ask for documentation. It's not as if they're just going to be pulling--I mean it's--the argument is they would not be pulling people over because they look like they could be an illegal immigrant.

MR. EVAN THOMAS: Well, she says no racial profiling, but what do you think is really going to happen here?

MR. GREGORY: Mm-hmm.

MR. THOMAS: Racial profiling. It's--I--if you leave individual police, however well-intentioned they are, they're going to be in situations where they're--it's going to create abuses. I think it's without, without question. The issue is how quickly it will get to the courts. I think it's going to get struck down because it's going to be applied in some very abusive way. But, in the meantime, it's polarizing and chaotic.

MR. GREGORY: You have--you--Erin, a debate over the merits of this, whether there should be comprehensive reform. Senator Mitch McConnell is saying the time is not right to pursue this kind of reform. And you heard Senator Shelby say, well, maybe it might be right. What's
interesting for Democrats is do they want immigration reform when, if you have a lot more people who are here legally, that could have an impact on healthcare reform. If you're trying to make the numbers work and you have all these people who could get additional health insurance benefits from the government, doesn't that make it hard to rein in costs?

MS. ERIN BURNETT: Oh, it certainly does. I mean, it comes right to the heart of the healthcare issue. I mean, when you look at the numbers here, what are the numbers we always hear, 20 million people are in this country illegally and that would, according to a lot of insurance executives, that's really the lion's share of the, the people who are currently uninsured. So there is a clear link to be made on that front. In terms of the, the other side of this, I would say just from the business perspective you would expect real pushback on a bill like this from business. They want more immigration, but what's interesting is that you're talking about doing this in a state where your, your problem is Hispanic immigration. You're not going to get a lot of business support to fight against that, the immigrants that they want in the country are the Indian immigrant, the Chinese immigrants, Korean immigrants. That's where you get a fight. But, but you're going to--you're not going to get a big push on the business side to try to protect Hispanic immigrants.

MR. GREGORY: And, Evan, look at the politics of this, Senator John McCain came out in support of the governor's bill. This was the same Senator McCain who with Senator Kennedy fought for comprehensive immigration reform. It says something about the political mood and the landscape politically of the country.

MR. THOMAS: And I'm sympathetic for that, a politician's got to get re-elected. But this was a guy who really knew how to get to the center and to reach across the aisle, and he came close a few years ago in getting this done. Now here he is pandering like crazy to get himself
re-elected and endorsing a bad bill. I--people who know McCain are disappointed by him. I mean, you understand, he's a politician, but really.

MR. GREGORY: Let, let--David Brooks, I want to talk--so the president's talking about taking on immigration reform, but let's also talk about financial reform. And I want to talk about the president's approach to this, his performance through this and how it's different from some of
the other fights. He went up to Wall Street, he had, he had talked about the fat-cat bankers in the past, he had gone after AIG bonuses and all the rest, and yet this is what he said in part on Thursday:

(Videotape, Thursday)

PRES. OBAMA: I'm here today specifically when I speak to the titans of industry here because I want to urge you to join us instead of fighting us in this effort. I am here--I'm here because I believe that these reforms are, in the end, not only in the best interests of our country but in the best interests of the financial sector.

(End videotape)

MR. GREGORY: Much different tone. A senior White House official told me this week they felt a public flogging of Wall Street would have been counterproductive. Take a step back and, and assess how the president has approached this as compared to different fights he's faced.

MR. BROOKS: Well, first of all, it's a different fight, but I think this is who he authentically is. There's, there's always a temptation when Democrats are, are doing poorly in the polls, which they are now, to take the Huey Long route, to bash business and try to shin up some popular
support, but that's genuinely not who the president is. You know, I have some arguments with my colleagues on the right, "Is the guy a socialist?" And I think if you look at the range of his behavior over this last 15, 16 months, he's a moderate, pragmatic liberal, but he is not a socialist. And his instinct, if you talk to him, or if you read his book, it's always "on the one hand, on the other." His mental formulation is always this and that, and it's always a balance in his mind. And so that's why I may be six notches to the right of him but I still think he's always open to argument, he always wants to talk to people even if they're on Wall Street, and I think that's just the general temperament of the man, which has a very wonderful effect on curbing what would be, I think, a polarizing effect of a lot of presidents, even if you disagree with him on issue after issue.

MR. GREGORY: Right. And there are disagreements, Erin, on Wall Street in terms of his approach to financial regulation. You heard Senator Shelby and Dodd. What do you take away with in terms of what's actually going to be passed and what it's going to mean?

MS. BURNETT: It, it--it's, it's a fascinating process I have to say. My concern is that a couple of crucial things are not in this bill really at all. You raised one of them which is we had a lot of regulators and a lot of these institutions which failed--Lehman, Bear among them--were regulated. So this bill says we're going to have more regulation and a council of regulators, but it doesn't necessarily deal with how we're going to get them to be smarter and better and more on the ball. SEC has 3,700 employees and 35,000 regulated institutions, they're only going to get more as a result of this. So it doesn't deal with that, and it doesn't deal with the ratings agencies which, of course, were at the core. What it does try to do is say, "When an institution fails, we're not going to put the taxpayers on the hook,” and you are also right there in the court. They haven't really solved how they're going to avoid
that. They have a $50 billion number they're putting in this bill, the assets of the biggest bank in the country, Bank of America, are north of two trillion. So the amount of what we're putting in and the substance of how we deal with it is, is not there yet.

MR. GREGORY: ...and, and, and it strikes me that a lot of people dislike Goldman Sachs, and they really don't understand what Goldman Sachs does, but they just know that they dislike them.

MS. NORRIS: Right.

MR. GREGORY: And then there are people who know what Goldman Sachs actually does, and they dislike them for different reasons.

MS. NORRIS: Right.

MR. GREGORY: And yet you have these e-mails come out today...

MS. NORRIS: Mm-hmm.

MR. GREGORY: ...that, that talk about kind of celebrating the fact that they were betting against the housing market, sort of betting against the economy and making a lot of money. This is a wholly different question from whether there was--whether the securities laws were violated in terms of some of those other matters that the SEC is looking at. But what do they face as they come to Capitol Hill this week?

MS. NORRIS: Oh, I, I, I...

MR. GREGORY: Lloyd Blankfein's going to testify.

MS. NORRIS: ...I, I, I think it's, it's--you know, it makes you think of the tobacco executives coming and raising their right hand and the auto executives coming and raising their right hand. I think they're probably going to take a grilling, you know, in the Senate. But more important than that, and that's, that's--they're going to take a, a grilling when they come to Capitol Hill, but they're--more importantly than that, the, the public...

MS. NORRIS: ...as, you know, they're, they're held in very bad odor right now in, in, in many, many places. And we talk about reform and what reform is, we're seeing in some ways, though, that the wheels of reform are already working in the, in the evidence that we see in the Goldman Sachs case. I mean, this, this is evidence--the SEC for many years was outgunned. They didn't understand the industries that they were supposed to regulate, and, in this case, they've created a new division. They have someone--Robert Khuzami, who is...

MR. GREGORY: Mm-hmm.

MS. NORRIS: ...is heading this division, who's, who's hired many people that will--that really now understand what goes on within places like Goldman Sachs. He hired former executives and...

MR. GREGORY: Yeah, go ahead. Yeah.

MR. BROOKS: I'd like to defend Goldman Sachs.

MR. GREGORY: Yeah.

MR. BROOKS: I mean, we had a mania. Everybody thought housing prices were going to go up forever. Who was going to stop that? Well, it wasn't the Fed, it wasn't the guys at Fannie and Freddie, it wasn't the great and the good, the people leading Citigroup and all those. It was a bunch of arrogant scuzzballs who said, "Everybody else in the world is a bunch of idiots. I know better, I'm going to put a lot of money betting against that, betting against this bubble." And they happened to be right and they happened to be intelligent.

MR. GREGORY: Right.

MR. BROOKS: And they are scuzzballs, but frankly...

MR. GREGORY: Right.

MR. BROOKS: ...a lot of people who were going long on the market were scuzzballs, too.

MR. GREGORY: Yeah. And they--and you--to further that argument, the argument, Evan, is that, that they could--they thought the market was too hot. That's, that's the reason why you, you short the--I mean, Erin, you can correct me if I'm wrong and--because it's all written down here in this Journal of Derivatives that Erin Burnett brought to the program this morning. But they were shorting the market, betting against it because they thought it had gotten out of hand. And--but it was a way to make money. But the follow-up question is, is that good for society? Are they creating wealth for anybody besides the firm?

MR. THOMAS: The problem for Goldman is that they were once known for taking care of their clients, "You come to Goldman, and we take care of you." They evolved into more of a gambling casino, a very smart gambling casino...

MR. GREGORY: Right.

MR. THOMAS: ...as David said, they made some smart bets. But the idea that they're not serving their client has crept in a way that makes it feel like they're playing everybody for suckers. And I don't think that's entirely fair...

MR. GREGORY: Right.

MR. THOMAS: ...but the perception is that they got the inside information, you don't, you're the sucker where they're the smart guys and they're getting rich. It's more complicated...

MR. GREGORY: Let, let me just get a reaction from Erin, though, on
the...

MS. NORRIS: ...what is, what is right...

MR. GREGORY: Yeah.

MS. NORRIS: ...and what is good are two different things.

MR. GREGORY: Yeah.

MS. NORRIS: And particularly in a, in a time where the banks came Washington, hat in hand, asked for bailouts, needed to be pumped up by the federal government. Sure, they may have done the right thing. They may--there may have been, you know, the smartest people in that universe in that room making smart decisions. But was it good for the American economy?

MR. GREGORY: I want to get Erin in on this, and I want to, I want to add Mayor Bloomberg from New York and his view on this. He was--it's reported by the New York Post this week where he thinks this has gotten--this criticism has gotten out of hand. "[Mayor] Bloomberg, who's been critical of Democrats for trashing Wall Street to score political points, said the courts should determine whether Goldman is guilty of securities fraud. He cautioned Democrats against trying to make too much political hay at the expense of Wall Street.

"`Being an elected official, I think you have an obligation to do what you think is right, not what you think is politically popular at the time.'" His concern is not only sales tax receipts and other kind of taxes that help New Yorkers in the city...

MS. BURNETT: Right.

MR. GREGORY: ...and in the state, but also America's competitiveness, whether you, you, you really make it open season on the banks and on derivatives and on credit default swap...

MR. GREGORY: ...and that market will go overseas and the jobs will go with them.

MS. BURNETT: You know, they've made that argument before. Now, some would say, "Look, we've heard that before with hedge funds, and everyone was going to go to London," and they didn't. And now they're saying if we regulate derivatives they'll go to Singapore. They probably won't. But when it comes to Goldman, I, I think there's a very crucial point here. Goldman's argument is going to be, "We weren't smarter than everyone else in the room. We didn't get it right in 2007. We might have," which is what the committee's going to talk about, "but in 2008 we didn't. We lost billions of dollars, and we weren't smarter than everybody else," which is going to really impact their reputation as a firm. They feel that it would have been better if they failed. They're saying, "We did risk management. You wanted to go along the housing market. We didn't want to take the risk, so we hedged it, and therefore our firm survived. And now the country wants to punish us for doing what we were supposed to do."

MR. GREGORY: All right, we're going to take a quick break here, and we're going to go onto a different subject when we come back, which is have the government wars replaced the culture wars? More with our roundtable right after this break.

(Announcements)

MR. GREGORY: We are back now with the roundtable. And a big question that I've been thinking about this week, whether it's health care and its intervention into the economy, whether it's economic stimulus or whether it's financial regulation, it is about this debate between the role of government in society, in the economy, in our lives generally.

David Brooks, you have been thinking about this a lot and you wrote this in your column on Friday: "In the first year of the Obama administration, the Democrats, either wittingly or unwittingly, decided to put the big government-versus-small government debate at the center of American life." How's that playing out?

MR. BROOKS: Not well, I don't think. I don't think it's good for the country. You know, we had a bitterly divisive culture war for a bunch of years, then we had a bitterly divisive debate about Iraq. And I think a lot of people, including President Obama, were hoping we could get to other debates about opportunity, about productivity, about fiscal problems. And that will--those would have been debates which would have structured some bipartisan cooperation. But for whatever reason, we fall into a big government vs. small government debate. And this is like a social script that puts all the Republicans on the anti-government mode, very polarized; strengthens the libertarian, more polarized part of that party; puts the Democrats on a more "let's use government to do this and that" mode. And so you get this intense polarization which we've seen over the past year. It also tends to help Republicans, by the way. But
it's created, not only an end to the polarization, but it's magnified it, I think.

MR. GREGORY: And in fact, you saw this week, Evan Thomas, Pew Research Center comes out with a poll that says just 25 percent expressed a favorable opinion of Congress, virtually unchanged from March, prior to the passage of the healthcare reform bill. And there was this from the Pew's analysis: "Rather than an activist government to deal with the nation's top problems, the public now wants government reformed and growing numbers want its power curtailed. With the exception of greater regulation of major financial institutions, there is less of an appetite for government solutions to the nation's problems--including more government control over the economy--than there was when Barack Obama first took office.” A lot of people think, "Government can't get it done. They're broke and they can't do things well."

MR. THOMAS: And Obama, you would think he'd get some points for first he passes health care, looks like he'll finance--pass financial reform. But he doesn't. He sort of floats around low in the polls. People are really down on government. It--I--to me, it's a deflection from the real issue, which is how we're going to pay for government. That's the big thing looming out there. That's what we ought to be talking about. And, unfortunately, both sides have got to give on something because we're going to--you can't deal with it unless, one, you raise taxes, which people don't like; and, two, you cut benefits. Both sides got to give. That's what Obama needs to be talking about because that is the real challenge facing us.

MR. GREGORY: It's also, Michele, a challenge for Republicans as well. We've got an economy now where you have 53 percent of our economy is--our debt is 53 percent of our total economic output, and it's expected to go yet higher. Kim Strassel, writing in her column in The Wall Street Journal, talked interestingly about the kind of opposition that Republicans are mounting and what the real Republican civil war is about. She writes, "The Republican Party is split. But the real divide is between reformers like [Florida Republican US Senate candidate Marco] Rubio and Wisconsin Representative Paul Ryan, who are running on principles and tough issues, and a GOP old guard that still finds it politically expedient to duck or demagogue issues. As Republicans look for a way out of the wilderness, this is the rift that matters." Marco Rubio has talked about raising the retirement age for Social Security. Paul Ryan has talked about fundamentally restructuring Medicare in a way that's controversial and probably not politically popular. But it goes to Evan's point, there's some reform-minded thinking out there. Is that going to win out in terms of how Republicans oppose the administration?

MS. NORRIS: Well, you know, you talk about this being a challenge for Republicans. I mean, for--many people see this as--in an opposite way, they say this is actually an opportunity for Republicans. Because, as David said, it pushes it--it actually, it motivates the people that are
on the far right. It's possible for them to do this. But in order for them to talk about reform, as long as a Democrat is sitting in the White House, there has to be the kind of bipartisanship that we have not seen in the past 18 months and that we don't necessarily see on the horizon beyond the banking bill. It, it is--there's opportunity for this, but unless there's a way that they can move forward and actually start working across the aisle, I think it's very hard to have any kind of meaningful reform that is pushed for and that is, is championed by Republicans.

MR. GREGORY: And yet, is the challenge for President Obama managing so much government expansion that he has to still be talking about a way--about, you know, the economy is improving, how they're creating jobs over the next two years, rather than looking backward and looking, you know, for the villains on Wall Street?

MS. BURNETT: Right. And, and look, part of it is our economy's growing, and it's growing at a very rapid rate right now. Now, a lot of that is stimulus-fueled. We don't know exactly how much of it's stimulus now and how much of it's real. But we're just coming off an earnings
season where companies actually grew revenue for the first time since this crisis began. That may sound sort of, oh, Wall Street to people, but that's what America's about. If you're selling more things and revenue is going up, people are buying more things. So if the economy improves, a lot of this fiscal situation will improve. Tax revenues will go up. Now, not in any way all of it.

MR. THOMAS: But here's the thing...

MS. BURNETT: But that will help him politically.

MR. THOMAS: Here's the thing. This idea that we're going to grow our way out of it, which has been the great American way for a long time, you look at those long-term numbers, that's just not going to happen. The gap between what--the revenues we have coming in and the expenditures we have going out in the next 10 years are not going to be bridged by growth. We're going to have to do something about that situation. It's the thing that just nobody wants to talk about, but there it is.

MS. NORRIS: And, yeah, two words: baby boomers.

MR. BROOKS: But...

MS. NORRIS: You know, as they start to...

MR. GREGORY: Right.

MS. NORRIS: ...march into retirement and really put a drain on both Medicare and Social...

MR. BROOKS: Can I just say something about the Republican mounting strategy, which is people like me would like there to be centrist, like Governor Crist, people like that. But the center has so far proved unprincipled, and people like Marco Rubio and Paul Ryan have shown
they're principled. And when you're disgusted by government, you congregate toward people like that. And so the evidence shows overwhelmingly, so far, that the further right the party gets, as long as they're principled, the better they do. Has any party had a worse year than the Democrats have had politically this year? Democratic favorability rating has dropped 22 points in a year. The Democrats a year ago had an 11 point party ID advantage over the Republicans. All that's gone. So the Republicans are surging at the point they're moving to the right with people like Rubio. And so that's where the data is. People like me would wish, you know, go for the middle. But the data supports the idea that people like Rubio are driving the party to victory.

MR. GREGORY: Well, OK, but the, if your desire is for the center, where, to come back to your original point, is there a more centrist big government argument to make? In other words, does President Obama have to win the argument that government is actually helpful?

MR. BROOKS: Yeah. Well, the, the, he won election because he won independents. The tea party movement is like really big and sort of interesting, but the core movement in politics has been in the center. He's lost independents. And so he has to go being sort of the way he was
on Wall Street this week, which is a pragmatic intelligent guy who talks about the things Evan talked about, that we need to have this, this--these things on both sides. And if he can embody that, he'll, he personally will be able to recapture the suburban voter. Whether the Democratic Party in the House can do it I'm really doubtful.

MS. NORRIS: If the party moves, if the Republican Party, though, moves further to the right, do they capture those voters that are in the middle?

MR. BROOKS: Well, I, personally I'm dubious. But I'd love to see some evidence to suggest that the Republicans I sort of like would do well. I don't see any evidence of that. I see the Rubios doing really well.

MR. THOMAS: But can the Rubio people ever get the 51 percent?

MR. BROOKS: Right. I, I think the Republicans will do phenomenally well this year.

MR. THOMAS: Mm-hmm.

MR. BROOKS: But it would be tough to see a Rubio-type candidate winning
in 2012.

MS. NORRIS: Mm-hmm.

MR. BROOKS: But remember, the politic, the politics of the country are unprecedented, the disgust is amazing, and so I think we'd be hesitant to predict something like that.

MR. GREGORY: Well, and, Evan, how does Charlie Crist, Governor Crist down in Florida now thinking about becoming an independent to get out of this primary fight.

MR. THOMAS: Yeah.

MR. GREGORY: You know, he embraced the stimulus with President Obama and has suffered politically. As you, the question I asked Senator Dodd, how does President Obama play in an election year for Democrats?

MR. THOMAS: Well, he's, he's--you know, he's appealing, he's reasonable, but nobody's listening. I mean, it's like he's, he, I don't think he's really getting any, any real, real traction. I think he's in a way too reasonable. In an era that we live in where everybody is kind of loud and dramatic, his very reasonableness means that he kind of floats along and doesn't have much impact one way or the other. Now, maybe a few victories will help him, but I don't see that. It's just like he's drifting. I don't see the move to the center for him that would, that
would really help him. I just--I don't think he's a force.

MR. GREGORY: Very quickly. Does Wall Street have a legitimate alternative to financial reform?

MS. BURNETT: No. They're going to support it. They're going to fight for as many loopholes as they can get, but they're going to support it.

MR. GREGORY: All right. That was a great short answer from somebody who subscribes to The Journal of Derivatives, Erin Burnett.

Thank you all very much.

We're going to continue our discussion with Evan Thomas about his new book in our MEET THE PRESS Take Two Web extra. You can also read an excerpt from the book, which is "The War Lovers: Roosevelt, Lodge, Hearst, and the Rush to Empire, 1898." And find updates from me
throughout the week. It's all on our Web site at mtp.msnbc.com.

And we'll be right back.

(Announcements)

MR. DAVID GREGORY: Before we go today, we'd like to say a quick hello to our audience across Asia, now watching this broadcast there Sunday evenings on CNBC.

That's all for today. We'll be back next week when we'll come to you in high definition and debut a new look for the program. You can get a sneak peek of that look on our Web site right now. One thing won't change, of course, if it's Sunday, it's MEET THE PRESS.